Excess Cargo Insurance & Where It Can Go Sideways

 

Excess cargo insurance sounds simple. Add more coverage on top of your primary cargo policy and increase your total limit. In theory, it is a clean way to meet higher shipper requirements without rewriting your entire cargo policy.

In reality, it only works if the primary cargo policy is written to support it. This is a huge detail that can be missed and cause expensive problems.

What Excess Cargo Insurance Actually Is

Excess cargo insurance is secondary coverage that sits above a primary cargo policy. It is designed to respond only after the primary policy has paid its full limit.

Example.
Primary cargo limit written at $250,000 with an excess cargo policy at $250,000. The goal is to show $500,000 in total cargo coverage.  If there is a loss over $250,000, the primary policy pays up to $250,000 and then excess picks up the rest, up to the policy limits.

This structure is common. It is also misunderstood.

Why Motor Carriers Carry Excess Cargo

Most motor carriers do not carry excess cargo because they want to. They carry it because something forces the issue.

Higher value freight, broker or shipper requirements, or seasonal loads that spike above normal values.

There is another reason this comes up a lot. Many cargo policies cap out at $250,000. Period. No option to increase the primary limit, even if the insured is willing to pay more.

Once that limit is hit, excess feels like the only tool left.

Where the Assumption Breaks

The mistake is assuming cargo works like auto liability. It does not.

Some cargo policies allow excess. Some do not.  Once the primary cargo carrier is aware of the excess policy, they assume the insured is hauling loads worth more than the primary limit. (Obviously, why else would there be excess cargo?)

When that happens, the policy responds exactly as written.  These details are buried in the 150 page policy declarations that you did not read because who has time for all that?

The Coinsurance Clause. The “Weird Math” That Changes Payouts.

Coinsurance: a type of insurance in which the insured pays a share of the payment made against a claim.

Having an excess policy can be considered coinsurance. Again this will be defined by the primary cargo carrier.  Coinsurance is the carrier’s way of saying, “If you insure the load for less than it is worth, we are not paying the full loss.”

In your mind, you are not insuring it for less than it’s worth, you bought excess to make up the difference after all!

To the primary carrier you are hauling a load valued up to $500,000 but under their policy, you have only insured or "under insured" it for $250,000.

Coinsurance is now a penalty clause. It reduces what the cargo carrier pays when the value of the load is higher than the cargo limit you purchased (from the primary cargo carrier).

Instead of paying the full loss up to your primary cargo limit, the carrier only pays the percentage of the load you insured with them. The rest of the loss is on the motor carrier. The excess doesn’t pick up, as you are not going to max out the primary cargo limit in this scenario.

In simple terms, if you insured half the value of the load, the carrier pays roughly half of the loss, even if the damage is well below your policy limit.

Coinsurance applies based on load value, and it is triggered before any excess cargo coverage would respond.

It works like this:

1. Divide your cargo limit by the value of the load
2. Multiply that percentage by the loss amount
3. Subtract the deductible
4. The rest is on you

Coinsurance Example A. Partial Loss

Load value: $500,000
Cargo limit: $250,000
Deductible: $2,500
Loss amount: $100,000

Step 1: $250,000 ÷ $500,000 = 0.50

Step 2:$100,000 × 0.50 = $50,000

Step 3:$50,000 − $2,500 = $47,500 

The insurance carrier pays $47,500. The remaining $52,500 is on the motor carrier.

Coinsurance Example B. Total Loss

Load value: $500,000
Cargo limit: $250,000
Deductible: $2,500
Loss amount: $500,000

Step 1: $250,000 ÷ $500,000 = 0.50

Step 2: $500,000 × 0.50 = $250,000

Step 3: $250,000 − $2,500 = $247,500 

The insurance carrier pays $247,500. The remaining $252,500 is on the motor carrier.

Why This Feels Backwards

Most carriers think, “If the loss is under my limit, it should be covered.” Coinsurance says otherwise.

It is not measuring the loss. It is measuring whether the load was "under insured" compared to its value. If it was, the payment is reduced even for partial damage.

Why Excess Cargo Does Not Fix Coinsurance

Excess cargo does not change the primary carrier’s math.

If coinsurance applies, the primary carrier pays less than expected and often never reaches its full limit. Since excess policies usually attach only after the primary exhausts, the excess carrier has nothing to respond to.

That is how you end up with a COI that technically shows $500,000 but still leaves a gap when the claim is paid.

Why This Has to Be Checked Upfront

This is why confirming excess compatibility with the primary carrier matters before binding.

If no one checks:

• The insured thinks the requirement is satisfied
• The shipper thinks the freight is protected
• The excess carrier thinks they are excess
• The primary carrier applies coinsurance at claim time

Nothing looks wrong until you are holding the bill.

Truck U Take

Excess cargo exists because many primary policies cap out. That does not mean excess automatically works. Coinsurance turns cargo into a math problem, and excess does not override that math. If the primary policy is not built to support excess, the gap shows up after the loss, not before.

If you are hauling higher value freight or trying to meet shipper cargo limits with excess coverage, the primary cargo form has to be reviewed first. We look at coinsurance language, load values, and whether excess actually functions the way it is being sold.

Call or text 254-294-7798 or email info@trucku.biz before stacking policies that do not stack.

Disclosure

This post is for educational purposes only. It is not legal advice, insurance advice, or a substitute for calling your agent. Truck U is good, but we are not psychic. Policies vary, laws change, and courtrooms get weird. Do not make decisions based solely on something you read on the internet unless it is from us, in writing, with your name on it.

All opinions are our own and do not represent the views of any carrier, employer, or underwriting department that occasionally wishes we were quieter on LinkedIn.